What I Learned Before I Sold to Warren Buffett An Entrepreneur’s Guide to Developing a Highly Successful Company Barnett C Helzberg, Jr John Wiley & Sons, Inc What I Learned Before I Sold to Warren Buffett What I Learned Before I Sold to Warren Buffett An Entrepreneur’s Guide to Developing a Highly Successful Company Barnett C Helzberg, Jr John Wiley & Sons, Inc Copyright © 2003 by Bonner Properties, Inc All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-750-4470, or on the web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, e-mail: permcoordinator@wiley.com Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services, or technical support, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products, visit our web site at www.wiley.com ISBN 0-471-27114-4 Printed in the United States of America 10 This book is dedicated to my favorite journalist and Mom, Gladys Feld Helzberg (1905–1973), who gave her sons so very much in every way, including love of the language and empathy for others And to Dad, B C Helzberg, Sr (1903–1976), who gave me so many of the teachings that are in this book as well as so many thoughts on how to be a happy and successful person Acknowledgments T hanks to my bride, Shirley Bush Helzberg, who gives me strength, spirit, and inspiration daily, Warren Buffett for his help and encouragement, Sam Fleishman, my wonderful and conscientious agent, Patricia Brown Glenn, for her vital advice, Kim Isenhower, who claims she redid this book eighty times, Paul Wenske, without whom it would not have happened, and to those who contributed by editing, adding material, and encouraging me, including Dr Bob Clark, Dr Alice Ginott Cohn, Ted Cohn, Dr Rich Davis, Senator Bob Dole, Tom Eblen, Pola Firestone, Tom Gill, John Goodman, Bar Helzberg, Bush Helzberg, Charles Helzberg, Rabbi Morris Margolies, Harvey Mackay, John McMeel, Dick Miller, Dr Pierre Mornell, Beth Smith, Dr Harvey Thomas, and the friends, students, Helzberg Diamonds Associates, Helzberg Entrepreneurial Mentoring Program members, and my mentors, who put up with me and taught me through the years vii Balancing Your Life Work, Play, Children, Health, and Money 229 trips and fishing trips I drove with them to college and back feeling like a very happy thief stealing one-to-one time with each Most entrepreneurs I have known care a great deal about their families and give a good deal of thought to the implications of entrepreneurship You need a highly supportive spouse and family, and the realization that you not have unlimited control of your agenda, especially when a crisis arises Other parts of the balancing mix include health, which is affected and controlled to some great extent by you in the areas of weight, strength, and flexibility, although not in chronology Is your most vigorous exercise on a golf cart? What you want to look back on when your children are adults—what memories and times with them? Are you committed to preserving your friendship and love with your spouse so when your children leave, two strangers will not be left at home? I especially admire today’s entrepreneurs because they consciously think about these parts of their lives in relation to their business decisions I did not see this happening in my generation to an equal extent Family implications are a major piece of your entrepreneurial decision It goes much further because your family will have to deal with your emotions and financial strains when things are very difficult in the business Your own reaction to these traumas is worth considering It is well worth taking the time to decide your priorities and discuss the implications of entrepreneurship with your family 230 Focusing Mining for Diamonds ♦ Value output not input Putting in unnecessary hours without results is foolish ♦ Don’t confuse activity with productivity ♦ Balance your life Treasure every moment with your family The opportunities won’t return ♦ Have a supportive spouse who understands the time you need to take with the business and is a wonderful parent for your children ♦ Are you taking care of your health properly? Are you a study in deferred maintenance? ♦ Your life as an entrepreneur is not in your total control; the family is affected by business crises and the business is affected by family crises Expect crises, and prepare for them if possible At least be aware of the inevitability of crises along the journey of life I wish that I had known sooner that if you miss a child’s play or performance or sporting event, you will have forgotten a year later the work emergency that caused you to miss it But the child won’t have forgotten that you weren’t there —Laurel Culter, vice chairman, Foote, Cone & Belding To be happy at home is the ultimate result of ambition —Samuel Johnson (1740–1795), English poet, essayist, critic, journalist Helzberg Hint 80 Giving Back G iving back may be the most fun you will ever have Giving back is the most selfish thing I personally because I get so much out of it I don’t feel it’s in any way generosity, but rather the most enjoyable, the most ennobling and perhaps the most selfish thing I The other side of giving back is the example of individuals who for ego reasons take positions in charities when their companies and their employees are at risk for their jobs or their bonuses Your first duty as an entrepreneur is to make your company profitable in order to ensure the security of your associates’ jobs and the future of your company That should take precedence over outside activities no matter how noble! I have received valuable advice on outside charitable activities from a couple of my mentors Our executive vice-president, Marty Ross told me, “Don’t ever become the head of anything,” because when that top paid professional leaves as they inevitably from time to time, you end up squarely in the catbird seat Ewing Kauffman’s advice was, “Limit your activities to a total of two in order to be able to continue to give proper focus to the company.” My own thought would be to only participate where you feel you can genuinely contribute, not where there is already expertise far beyond your own on a board or other activity There can be great joy in working with tax-exempt organizations when and where you can focus for an extended period and really help and feel progress Best of all, the people you work with will become treasured friends! 231 232 Focusing Mining for Diamonds ♦ Consider outside activities when things are going well with your company ♦ Limit your activities to a comfortable number and to a comfortable level within the organization ♦ Consider carefully time and potential loss of family time I did not find the world desolate when I entered it and as my ancestors planted for me, so I plant for my children —The Talmud If I am not for myself, who will be? If I am not for others, what am I? If not now, when? —Hillel You make a living by what you get You make a life by what you give —Sir Winston Churchill (1874–1965), British Prime Minister You have not lived a perfect day, even though you have earned your money, unless you have done something for someone who will never be able to repay you —Ruth Smeltzer Appendix A Recommended Readings Buckingham, Marcus and Coffman, Curt First, Break All the Rules (New York: Simon & Schuster, 1999) Cohn, Ted, and Considine, Ray WAYMISH Why Are You Making It So Hard for me to give you my money? (1-888-WAYMISH) Collins, Jim Good to Great (New York: HarperCollins, 2001) Herzberg, Frederick “One More Time: How Do You Motivate Employees,” Harvard Business Review (republished January 2003) McGregor, Douglas The Human Side of Enterprise (New York: McGraw-Hill/Irwin, 1985) Mackay, Harvey Dig Your Well Before You’re Thirsty (New York: Doubleday, 1997) Mornell, Pierre Hiring Smart (Berkeley, California: Ten Speed Press, 2003) Smilor, Ray Daring Visionaries: How Entrepreneurs Build Companies, Inspire Allegiance and Create Wealth (Avon, Massachusetts: Adams Media Corp., 2001) 233 Index A Alphabet soup communication, 207–208 Analysis paralysis, 70–72 Answers, finding, 169–171 Arrogance and humility, 156–158 Asking communication and, 188 feedback, 202–204 what was learned, 111–112 Associates See also Hiring belief in, 36–38 caring for, 215–217 creating fun, 54–56 dignifying every task, 185–187 encouraging high achievers, 147–150 expectations, 161–162 fostering a sense of urgency, 60–61 go–getters or slackers, 103–104 incentives, 27–28 internal customers, 19 motivating, 143–146 ownership, sense of, 154–155, 180, 187 positive fallout from Enron, 105–106 profit sharing, 58 socializing, 205–206 teaching, 182–184 B Bad news, positive responses to, 159–160 Balancing life, 228–230 profit and volume, 27–28 Borrowing wisdom and knowledge, 75–78 Bridges, never burn them, 39–40 Business defining what you do, 225–227 differentiation, 5–8 Buzzwords, 207–208 C Communicating See also Listening asking: the best communication, 188 235 236 Communicating (continued) avoid buzzwords and alphabet soup, 207–208 avoiding the use of “I” and using it properly, 211–212 building and retaining your credibility, 179–181 care and feeding of your associates, 215–217 care and feeding of your lenders, 220–221 care and feeding of your suppliers, 218–219 digging out the answers, 169–171 dignifying every task, 185–187 expectations, 161–162 getting honest feedback, 202–204 how to kill new ideas and communication, 172–173 listening and learning: why silence is a valuable skill, 174–175 to lunch or not to lunch with your client, supplier, or associate, 205–206 marketing, don’t say it, be it, 191–192 Marty Ross’s magic follow–up system, 199–201 mentors, pro and con, 176–178 Index negotiating: learn it or delegate it, 189–190 no surprises, 213–214 positive fallout from Enron, 105–106 preparing for controversial meetings, 193–194 shortening meetings and making them more effective, 195–198 should you communicate your success, 209–210 what you are teaching, 182–184 Competition, separating your business, 5–8 Complaints, opportunities in, 20–22 Constructive criticism, 91–93 Consultants, 29–30 hiring the right lawyer, CPA, or other professional, 133–134 Controllables, focusing on, 3–4 Core business, 11 Credibility, building and retaining, 179–181 Crisis management, 163–165 Criticism, constructive, 91–93 Culture belief in the individual, 38 fun, 54–56 integrity, 52–53 Customers asking for ideas, 115–116 Index complaining, 20–22 internal, 19 judging their world, 101–102 retention, 18–19 socializing, 205–206 treatment of, 39–40 D Dead horses, strategies for, 98–99 Decision making asking what did I learn, 111–112 borrowing wisdom and knowledge, 75–78 constructive criticism, 91–93 you view your associates as go-getters or slackers, 103–104 embracing growing markets, 73–74 focus groups, 87–90 following your gut, 83–86 gathering information, 79–82 going public, 109–110 how to have uncanny luck, 107–108 how to raise prices, 113–114 judging your customer’s world, 101–100 learning and growing from mistakes, 67–69 not giving up, 96–97 open letter to the entrepreneur to be, 115–117 237 paralysis of analysis versus knee–jerk decisions, 70–72 positive fallout from Enron, 105–106 should you make the plunge, 118–120 sticking with overall objectives, 94–95 when to give up, 98–100 Decisions test, 227 Defining a business, 225–227 Differentiating a business, 5–8 Dignifying every task, 185–187 Disaster planning, 24–25, 41–42 response, 163–165 E Ego communicating success, 209–210 entrepreneurs and, 31–33, 156–158 founder’s syndrome, 135–137 proper use of “I,” 211–212 Emotional maturity, criteria of, 38 Enron, positive fallout, 105–106 Entrepreneurs balancing life, 228–230 borrowing wisdom and knowledge, 75–78 building on everyone’s strengths, 135–137 238 Entrepreneurs (continued) ego, 31–33, 209–212 following your gut, 83–86 going public, 109–110 humility and arrogance, 156–158 learning from mistakes, 67–69 letter to, 115–117 luck, 107–108 should you make the plunge, 118–120 teaching, 182–184 using analysis, 70–72 Execution of ideas, 62–63 Expectations, associates, 161–162 F FedEx loyalty calculation, 22 Feedback, 202–204 magic questions, 92, 203 Filling a job, outside or inside, 130–132 Focus, 10–11 Focus groups, 87–90 Focusing balancing your life, 228–230 giving back, 231–232 what business are you really in, 225–227 Follow–up, importance of, 199–201 Founder’s syndrome, 135–137 Friends and relatives, selling to and hiring, 138–140 Index Fun creating, 54–56 giving back, 231–232 G Gathering information, 79–82 Geographical markets, 73–74 Giving back, 231–232 Giving up, pros and cons, 96–100 Goals characteristics, 35 setting, 34–35 setting standards for success, 147–150 Going public, 109–110 Gut feelings, 83–86 H Helzberg, Sr., B C., 33, 56, 97, 160, 171, 210, 214 Helzberg Entrepreneurial Mentoring Program, 76, 243 Helzberg new idea testing method, 48 High achievers, encouraging, 147–150 Hiring See also Associates building on everyone’s strengths, 135–137 choosing good people, 123–129 friends and relatives, 138–140 lawyers, CPAs, or other professionals, 133–134 Index looking outside or inside to fill jobs, 130–132 Humility and arrogance, 156–158 I Ideas encouraging, 172–173 execution of, 62–63 testing, 25, 46–49 Helzberg testing method, 48 Incentives, profit or volume based, 27–28 Information focus groups, 87–90 gathering, 79–82 Inspiring encouraging high achievers, 147–150 expectations, 161–162 on humility and arrogance, 156–158 leaving your campsite better than you found it, 151–153 ownership, sense of, 154–155 recognizing great work: how to motivate associates, 143–146 unintended consequences, 163–165 when bad news is good news, 159–160 Integrity, 52–53 Internal customers, 19 Interview outline, 126–128 239 J Jack Story, the, 20–22 K Knee–jerk decisions, 70–72 Knowledge and wisdom, borrowing, 75–78 L Learning mistakes, 67–69, 111–112 strategies for customers’ ideas, 115–116 Lenders, caring for, 220–221 Life balance, 228–230 Listening See also Communicating constructive criticism, 91–93 customers, 101–102 ego and, 32–33 feedback, 202–204 value of, 174–175 Loyalty, calculation of value, 22 Luck, 107–108 M Making decisions See Decision making Managing believing in people, 36–38 concerning yourself with only the controllables, 3–4 consultants: bane or bargain, 29–30 240 Managing (continued) execution is the key, not the idea, 62–63 having fun, 54–56 highest and best use of your time, 9–11 how to avoid overreacting to problems, 50–51 integrity: a long–run profit makers, 52–53 keeping customers, 18–19 keeping your ego in check, 31–33 making your business different, 5–8 managing risk, 23–26 never burn a bridge, 39–40 planning for disaster, 41–42 a sense of urgency, 60–61 setting specific measurable goals, 34–35 should incentives be based on profit or volume, 27–28 super service: friend to the entrepreneur, 12–17 testing new ideas: stacking your deck for success, 46–49 turnaround time at Helzberg Diamonds, 43–45 what are profits for, 57–59 your complaining customers: your greatest opportunity, 20–22 Marketing, 191–192 Index focus groups, 87–90 Markets, embracing growing, 73–74 Marty Ross’s magic follow–up system, 199–201 Max’s laws, 15–17 Meetings effectiveness strategies, 195–198 encouraging communication and ideas, 172–173 preparation for controversy, 193–194 Menninger, MD, William C., 38 Mentors, 176–178 Helzberg Entrepreneurial Mentoring Program, 76, 243 Mining for diamonds communicating, 171, 175, 178, 181, 184, 187–188, 190, 192, 194, 198, 200, 204, 206, 208, 210, 212, 214, 216, 219, 221 decision making, 69, 72, 74, 78, 82, 86, 89, 93, 95, 97, 100, 102, 104, 106, 108, 110, 112, 114, 116, 120 focusing, 227, 230, 232 hiring, 128, 132, 134, 137, 140 inspiring, 146, 150, 152, 155, 157, 160, 162, 165 Index managing, 4, 7, 11, 15, 19, 22, 26, 28, 30, 33, 35, 38, 40, 42, 45, 49, 51, 53, 56, 58, 61, 63 Motivation and associates, 143–146 N Negotiating, 189–190 NIH (not invented here) syndrome, 81 O Opportunity cost, 9–10 Organizational culture, 38 fun, 54–56 integrity, 52–53 Overreaction to problems, avoiding, 50–51 Ownership, associates and, 154–155, 180, 187 P Paralysis of analysis, 70–72 Performance encouraging high achievers, 147–150 ownership and, 14–155 Planning disaster, 24–25, 41–42 long-run success, 43–45 Positive reinforcement, 144 Positive responses to bad news, 159–160 Pricing strategies, 113–114 241 Proactivity, 163–164 Problems, avoiding overreaction, 50–51 Product markets, 73–74 Profit long run, 52–53 quick versus overall objective, 94–95 reasons for, 57–59 sharing, 58 short run, 28 volume balance and, 27–28 Public offerings, 109–110 R Recognition of associates, 143–146 Relatives and friends, selling to and hiring, 138–140 Risk management, 23–26 S Same store sales increase, 28 Sense of urgency, 60–61 Service principles, 12–17 value of, 14–15 Silence, value of, 174–175 Strategies for dead horses, 98–99 Strengths, building on everyone’s, 135–137 Success, 153 celebrating associates’, 215–217 communication of, 209–210 242 Succession planning, 31–32, 151–153 founder’s syndrome, 135–137 Suppliers caring for, 218–219 disaster planning, 42 socializing, 205–206 Surprises, avoiding, 181, 213–214, 220–221 T Teaching, 182–184 Testing new ideas, 25, 46–49 Helzberg testing method, 48 Theory X and Y, 103–104 Three magic questions for feedback, 92, 203 Time, best use of, 9–11 Index Turning a business around, 43–45 Tylenol poisoning case, 163–164 U Unintended consequences, 163–165 Urgency, sense of, 60–61 V Volume long run, 28 and profit balance, 27–28 W Wisdom and knowledge, borrowing, 75–78 Your thoughts, comments, and ideas about this book would be most appreciated (Sorry, it is not possible to honor requests for personal advice.) Write me at: Barnett C Helzberg, Jr 4520 Main Street Suite #1050 Kansas City, MO 64111 or BHelzberg@aol.com For information about starting an entrepreneurial mentoring program, write to: Helzberg Entrepreneurial Mentoring Program 4747 Troost Kansas City, MO 64110 Website: HelzbergMentoring.org ... (themselves) Are willing to work hard, exhibiting the discipline necessary to make a success Are willing to pay the very high price of lost time with family xxviii Know Thyself: What It Takes to Be an... night I reread the chairman’s letter in the Berkshire annual report There was Buffett again inviting companies that meet his acquisition criteria to send him information, and he would “promise... desire or stamina to go it on your own, is courting disaster Where there is no real will, there is no way Some aren’t willing to pay the price of giving up some time with their families The choice